How to Create a Safety Net For Your Business
I decided to do this lesson today. Because i hear from so many entrepreneurs about the stresses of running a business. The stresses of the unknown the stresses of the market whether it's a market crash or a pandemic or in some cases in some places in the world war these things can affect economies can affect your market can affect your business for an indefinite amount of time. You don't know how long that slumps gonna last. When covid started people thought. Oh this is going to be all done and dusted in a couple of months for good year in and people still don't know how long this is going to affect our lives and of course our businesses. So what you do when the inevitable will happen for talk about change things will change around your business in your environment in your market. One of the best things you can do to set yourself up to have that safety. Net is to make sure you have healthy profit margins. I know sounds very obvious. But this is just the first step. And he's gonna allow you to feel a little bit more comfortable. You should be working on building a war chest of funds for your business. This is not just for a rainy day. But it allows you to have a fallback something that you can use to pivot in your business just in case you have to reinvent yourself. This is what apple is so powerful. They have over two hundred and forty five billion dollars in cash in the bank. Why do you think. Apple doesn't just reinvest that money to make more money to build more products to hire more people. Will they know this rule. You have to have a safety net. Even apple is not totally immune to the things that can happen to them. Now i'm not asking you to have two hundred forty five billion dollars in the bank but the healthier margins the more likelihood you'll be able to have some cash reserves if you're self funded business a two one ratio should be your minimum meaning for every dollar you spend. You should be making to that means at the end of the month. You should be making double what you spent that month. Which means you have the equivalent of what you spent that month in cash. Leftover that you can put in the bank and safe now. Of course that's going to be counted as a prophet come tax time but your corporate tax are going to be a lot less than your income tax than if you just pocketed the money now. Having cash reserves is not as good. Because you can use that cash. If you need to create a new product to pivot you need to change but also by having some surplus having some cash in the bank Lenders are so so more likely to give you a line of credit. That will extend your runway that will extend your likelihood to be able to reinvent yourself like we say money is the oxygen of any business so the more of an extra reserved tank. You have of oxygen the better because things might be going well right now and they could go better but they could go worse to gotta plan for those rainy days or months or even years. Sometimes sometimes abysses can take a slump and then come back. It could be the market. It could be the fact that they're still doing. Research and technology is not there yet but it will be a couple of years. It could be that. They took a hit on their brand. And then you some time to recuperate. So that's the finances okay. But that's not all there are other liabilities in your business that you may not be aware of like the people that you work with the people that you hire. What's your safety net. What's your backup plan. If your top engineer leaves you or decide to retire what do you do if your best copywriter decides to part ways or your social media marketer Decides to work for different company. Can't be seen a panic and you can't allow your systems or your business to just totally stop doing. What only does because somebody's leaving. This is why systems are so important in a business when you're building a business or building a set of systems and you want to document these systems in what we call. Soap's standard operating procedures is literally. Google docs writing out exactly how to do. Every task in your business and the person who does every role so say for example the customer service manager in your accompany their job other than being the customer service manager is creating an sap for their job. This is gold. This is one of the biggest assets you can build your business because that way everybody can live and breathe comfortably. Why because save for example somebody in our company leaves. You have a playbook to give somebody new and say hey. This is how you do your job. This is what was done Before this is what your predecessor was responsible for in this. How did it so building and soap's in your business creates a layer of safety just in case something happens and by the way something will happen. People will leave your business. This is the nature of employment people. Move on next if you can afford it especially in the most critical positions in your business have some redundancy so for example if you're in the service industry and you service people on the phone then is a good idea to have more than one. Customer service agent right. Just get somebody leaves you. You don't have any agents left. You have a few backup right. You have people that are trained up and can do the job. They might have to do some extra hours. But you're not left high and dry if you're running a software company. He's redundancy in the engineering department. This creates a safety net okay. You're don't lose nights of sleep if somebody leaves your company next. Is your critical tools. Have some redundancy with your tools. And i'm talking about just the major once. You don't actually have to buy these tools to have the research and know what's available so if you need to switch out you know exactly where we're going. What are your backup tools. What's your backup website servers. What's your backup domain name registrar. What's your backup payment processor. If you have to change things around if you have to swap out which ones are they just going to be a list people that you've already vetted you don't have to do any homework afterwards when switch. You're ready to go.